What is Money?
Money refers to an item that is generally accepted as a means of payment for goods and services. It is a legal tender that is recognized as an item of exchange amongst people. Over the years, the concept of money is one that has evolved as today there are means of payment that exist in electronic form, popularly known as digital money or digital currency. Digital money is what the world has come to know as cryptocurrency today. As technology becomes more prominent, payments are becoming more digital, which in turn results in reduced use of real money.
Unlike a coin or a dollar bill, digital money is not tangible, and it is only transferred and accounted for using computers. Bitcoin cryptocurrency is one of the most successful and widely used forms of digital money or currency. Digital currency or money is exchanged through the use of technologies such as online cryptocurrency exchanges credit cards, amongst others.
Understanding Digital Money
The concept of digital money is one that was initially conceived during the earliest stages of the internet. In the 1990s, various digital cash companies were established; however, “DigiCash” was the best known and earliest of these said digital cash companies. It is necessary to understand that most of these early initiatives were unsuccessful or quickly declared bankruptcy, which was mainly due to the fact that e-commerce had barely integrated into the internet, and only a few numbers of retailers could accept the early digital currencies. The introduction of PayPal brought about the idea of easy-to-use digital financial transactions. More people today are now willing to utilize digital money today as people are becoming more comfortable with technology and the technology itself provides security and safety.
Financial services companies enable digital money transfers and online transactions among two people across long distances. Without the introduction of digital money, numerous online retail websites would have been unable to operate efficiently. Digital money provides the possibility of banking online or through the use of a smartphone, and it also eliminates the need to visit a bank in person or use cash.
As earlier stated, digital money can be exchanged or transferred through the use of technologies like smartphones, credit cards, as well as online cryptocurrency exchanges. Cryptocurrency is the name given to a type of digital money that is secured using cryptography, which in turn makes it almost impossible to counterfeit or double spend. It operates through decentralized networks based on blockchain technology, which in context is a ledger that is stored through a network of computers. One significant feature of cryptocurrencies is that they are not issued by the government or central bank, which means they are free from government manipulation or intervention.
Examples Of Digital Money
One of the most common examples of digital money is seen in money issued by banking institutions that they possess electronically to invest or for trade. Banks possess liquidity requirements, which in turn means that they need to have a specific amount of physical money on-site; however, such requirements do not apply to digital money, which allows it to move around much more. Several banking institutions have departments that are responsible for handling sums in the millions and sometimes higher without actually seeing any physical cash.
Cryptocurrency is another example of digital money; Crypto, for short, is a type of digital money that exists within the blockchain network. Some consider the blockchain network to be secure as there is no oversight from any given financial authority. Cryptocurrency is bought, traded, mined, and kept in digital wallets until the said time the owner is ready to redeem or spend it. Some common forms of cryptocurrency include; Bitcoin, Ripple, Litecoin, and Ethereum.
Advantages Of Digital Money
Digital money or currencies provide major advantages to the market, one of which includes; providing users with a more suitable streamlined alternative. Digital money payments are not only instantaneous, but they also attract a low cost. They also introduce a higher level of transparency as well as record keeping to the sector.
Digital money or currencies easily achieve all these tasks through a peer-to-peer protocol. Similar to when you give a person a portion of a fiat currency, digital money doesn’t need intermediaries to function. The absence of third-parties during a transaction does not only increase efficiency but also significant results in the reduction of transaction costs and time.
These advantages are evident, especially during cross-border payments. The process of sending money internationally is time-consuming, and it also involves multiple checks, plus the process also attracts high costs. However, digital money or currencies help to eliminate these fees, like in the case of cryptocurrencies like Ripples XRP, which removes these concerns for banking institutions who want to send funds.
Risk Of Digital Money
One major risk associated with digital money increased usage is payment fraud. In context, payment fraud can be carried out in various forms; however, it basically revolves around unauthorized or fraudulent transactions completed by a cybercriminal. Some common examples of payments fraud include; illegal payments, breach of embargos and sanctions, fraudulent payments, data theft, internal manipulation.
As money is not transferred physically, it is next to impossible to determine who is on the other side of a transaction. This provides the opportunity for cybercriminals to scam people through digital money.
Over the years, there has been a significant increase in payment security, however, the complexity with which cybercriminals carry out fraud is also becoming increasingly complex. Payment fraud activity is constantly on the rise, and it shows no sign of reducing. These days, cybercriminals are becoming craftier and more confident as they are constantly devising different means and exploiting new weaknesses in others to manipulate digital money. Scammers are persistent and consistent in their efforts to attack payment systems, and when faced with difficulty in a particular method, they shift their attention to alternative payment methods.
Looking at the world generally, there is no doubt that digital money or currencies have not only gained prominence, but they have also helped reshape the international communities’ definition of money and continue to impact the world positively. It is safe to safe that digital money or currencies still has a lot of potentials that is yet to be discovered.
BitForex is an exchange service platform that can be classified as one of the Top 10 cryptocurrency exchange services. It is focused on providing millions of users with a digital currency trading and investment tool that is not only safe but also professional and convenient. BitForex has a high customer-oriented culture and state-of-the-art financial technology.
BitForex is programmed in a way that it can quickly adapt to the changes of the Crypto market while introducing new features like margin trading, enhanced trading charts, derivatives, and a host of others. The headquarter of BitForex is located in Hong Kong, while there are branch offices in countries like the United States, South Korea, and Singapore.